All states have laws that provide for protection and care of adults and minors who cannot, due to age or mental and/or physical impairment, care for themselves. The two types of court-ordered care are guardianship, where someone is appointed to take care of the day-to-day and physical needs of a person; and conservatorship, where someone is appointed to manage the money of a minor or disabled adult. These are good laws and necessary in a society that takes care of those who cannot care for themselves. However, this care comes with significant side effects.
Court oversight is the perceived advantage of both guardianships and conservatorships. Judges take a very conservative view of the dealings of conservators. They are held to stringent rules in many cases as to what expenditures and investments are approved as appropriate. Some courts will only allow the funds being managed to be put into low- or no-interest bank accounts at specific banks. The conservator might believe that a particular expenditure is reasonable based on the amount of money being held, but the court might disagree. As an example, I saw a case where the conservator for a seventeen-year-old wanted to buy a car for the teenager to go to and from school. There was a fund approaching three-quarters of a million dollars from an aunt’s estate being held for her. The conservator, who was the teenager’s mother, just wanted to buy a used car. The judge vetoed the idea as not necessary.
Had the girl’s money been held in trust for her with the girl’s mother as trustee, rather than conservator, there would have been no court oversight and no judge’s agreement would have been needed. This was a failure of estate planning on the aunt’s behalf.
Conservatorships for adults who are incapacitated are similarly unneeded if the incapacitated person has set up a durable power of attorney and a trust. Since the person named as POA and trustee could legally transact business and manage the money of the disabled person on a fiduciary basis, no court-ordered conservatorship would be needed.
This is important because in many states anyone can petition the local adult protective services branch of government to file for a conservatorship if there is evidence that the person needs protection. Typically, these petitions are filed to stop someone from mismanaging or taking the adult’s assets.
The petition for conservatorship or guardianship can be contested by the person who would be the subject of the guardian/conservator petition (the ward), and evidence of the existence of a power of attorney and trust could defeat the petition. Upon filing the petition, the court appoints a guardian ad litem (guardian at law or GAL), usually an attorney, who then visits the alleged incapacitated person (the ward of the court, if the petition is successful) and files a written report with the court detailing the ward’s condition. This GAL is supposed to protect the rights of the allegedly incapacitated person. All at attorney fee rates, of course.
It might be that the GAL reports to the court and says no permanent guardian or conservator is needed, but this too can be contested and witnesses, including the ward, can be brought in to testify. The problem is that even if the petition is defeated, and no permanent guardian is appointed, the subject of the petition has to pay the fees of the court-appointed GAL. Even though they win, they lose. It’s better to cut this off early by disclosing the documents to the court that eliminate the need for a conservator and guardian. Judges are typically happy to not increase their own caseload and may summarily dismiss the petition. I have used this tactic successfully.
Using Powers of Attorney to Defeat Probate Court Conservatorships
A power of attorney is basically just a permission slip giving someone the legal authority to do things for you. It might be limited to a particular transaction such as buying or selling a piece of real estate, with the power ending when the transaction is completed. Or it might be to do any kind of business on your behalf unlimited in time or scope and ends when either it is rescinded or you die. It could be to make medical decisions for you, including end-of-life decisions.
A so-called springing power of attorney is one that only becomes effective upon the occurrence of a particular action or situation. Mental or physical incapacity is the most common type of occurrence that allows a power of attorney to spring into effect. This avoids the need to go to court to transact business on behalf of someone temporarily or permanently mentally disabled. How to determine incapacity is spelled out in the POA document. Note that the trust document contains similar language and gives a successor trustee similar powers over trust assets. Be sure that these two do not conflict. It is far better practice to have one person fulfill both roles.
Here is one example:
Until I am certified as incapacitated as provided hereunder, this Power of Attorney shall have no force or effect. All authority granted in this Power of Attorney shall be subject to establishment of incapacity as provided hereunder. For purposes of establishing incapacity, whenever two licensed, practicing medical doctors who are not related to me or to any beneficiary or heir at law by blood or marriage certify in writing that I am unable to manage my financial affairs because of mental or physical infirmity and the certificates are personally served upon me, then the attorney(s)-in-fact named herein shall assume all powers granted in this Power of Attorney.
Anyone dealing with the attorney(s)-in-fact may rely upon written medical certificates or a photocopy of them presented to them along with the original Power of Attorney document, and shall incur no liability for any dealings with any designated attorney(s)-in-fact in good faith reliance on said certificate and the original Power of Attorney document. This provision is inserted in this document to encourage third parties to deal with my attorney(s)-in-fact without the need for court proceedings.
This is not language carved in stone. You might specify one doctor rather than two, or a particular type of physician specialty. Lawyers will likely write the provision differently, but the intent and legal effect is the same. The person named as attorney-in-fact has no authority to do anything unless and until the criteria for determining incapacity are met.
This type of POA is also called a durable power of attorney, since it stays effective even after a person is deemed incompetent. In that case the following sentence is used, which refers to the durable nature of the document:
After this Power of Attorney becomes effective, it shall not be affected by any subsequent incapacity which I may hereafter suffer or the passage of time.
The reason we use the durable language is because a POA by definition gives the agent the power to do anything that the person giving the power could legally do. If a person becomes incapacitated, they are no longer legally able to enter into contracts or sign legal documents, so the agent who is acting as the principal’s surrogate would likewise have no power to do those things.
Not all POAs have the springing language. If it is left out, the power is effective when the document is signed and delivered to the attorney-in-fact. There are good reasons why you might not want the springing power. A person who is elderly or medically disabled, still mentally competent, but who needs help conducting their normal business dealings such as taxes, paying bills, or managing investments will often use an immediate POA.
A probate court-supervised conservatorship is not necessary when a person has a properly prepared POA. The purpose of a conservatorship is to protect and manage the assets of those who are incapacitated and/or mentally incompetent and cannot take care of their own financial affairs. Combined with a revocable trust and a medical power of attorney, the court will likely not appoint either a guardian or a conservator.
Medical Powers of Attorney as a Way of Avoiding Adult Guardianships
Just as disabled or incompetent people might need someone to handle their business affairs, they usually need someone to do medical decision-making for them, such as consenting to hospitalization or surgery. All medical and dental decisions need to be made as well as decisions regarding end-of-life situations. Should life support be terminated or continued? What religious objections might a person have to certain procedures or drugs, and who is going to make these known? Even things that need to be done like picking up prescriptions or dealing with health insurance, Medicare, or Medicaid.
If the person has no medical power of attorney or advance directive, physicians and hospitals might well refuse to listen to family members regarding serious health issues. Liability is a big deal to health-care workers, and they may insist on a court-ordered guardianship to protect themselves. Once a person becomes incapacitated, it is too late to sign the documents naming a health- care advocate. The only recourse then is to the courts if the medical facility will not accept the family’s making medical decisions without the written medical directive.
Most states and many hospitals have fill-in-the-blank forms for a medical power of attorney. In some states a physician can appoint a health-care surrogate to make medical decisions for a disabled patient who has no health-care POA, but it is always better to be able to have a person you choose to make those decisions.
(To be continued...)
This excerpt is taken from “How to Avoid Probate for Everyone: Protecting Your Estate for Your Loved Ones” by Ronald Farrington Sharp. To read other articles of this book, click here. To buy this book, click here.
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